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Data Analysis Using SQL and Excel - Second Edition
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This chapter introduces survival analysis for understanding customers. The origins of survival analysis were for understanding mortality rates to calculate the value of financial products. This was pretty sophisticated stuff for 1693. Since then, the technique has been used in many areas, from manufacturing to medical outcomes studies to understanding convicts released from prison.
Two key concepts in survival analysis are the hazard probability, which is the probability that someone will succumb to a risk at a given tenure, and survival, which is the proportion of people who have not succumbed to the risk. For customer-based survival, these two values are calculated for all tenures. The resulting hazard and survival charts can be quite informative and help us better understand customers and the business.
Survival can also be quantified. The median customer tenure (or customer half-life) is the time it takes for half of the customers to stop. The point estimate of survival...
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